Tribute in the bag

Thailand’s latest junta, the National Council for Peace and Order (aka National Council for Underdevelopment as Usual), has confirmed it is committing to a US$23 billion high-speed rail investment. Beyond this I can find very few concrete details. But the expectation is that much of the construction work, as well as the rolling stock, signalling equipment, and even quite basic industrial inputs will be supplied by China. Late last year, before the junta got rid of Thaksin’s little sister, Chinese premier Li Keqiang was down in Bangkok doing the hard sell. When the junta boys grabbed the reins of power they made a show of putting the deal that was then shaping up on hold. But a few months later it is back in play, albeit possibly with some cuts to the project specification suggested by this Bangkok Post article (see the references to lower speed services).

Although we know nothing of the Chinese financing terms, it looks like the Celestial Empire has done an effective number on its traditional south-east Asian tribute states. First they leaned on the Laotians, the poorest and most biddable group, to agree to the first leg from Kunming through their territory. Now they have the Thais in the bag. Officially, the Malaysians say high speed rail is too expensive for them. But my guess is that the Malaysian government will fold once construction starts on the Kunming to Bangkok legs and sign a deal. The Chinese an easily twist their arms by threatening to buy their palm oil and gas somewhere else. (When I saw Mahathir late last year in KL he told me that he personally he is already in favour of a Chinese high-speed deal, so Beijing has one still-loud voice singing its song already.)

Who is all this investment good news for? It is good news for China’s rail equipment and rail construction firms, into which Beijing has sunk vast sums in order to master high-speed rail technology. And it is good news for bourgeois types like myself, who want fast, clean travel between their preferred Nanyang beaches and mountain retreats and the panda lairs of south-west China.

But we shouldn’t pretend it is good news for south-east Asian economic development. By the time there is a high-speed link all the way from Kunming to Singapore — which could now easily be completed within 10 years — the projects will have cost at least US$60 billion in today’s money. That expenditure will have done almost nothing to increase south-east Asia’s grasp of manufacturing technology, or even its project management capacity, because all the value-added goes to China. At a time when south-east Asia desperately needs to increase manufacturing employment to provide jobs for countries’ young populations, the China high-speed rail deals instead reveal the developmental bankruptcy of regional politicians. Their only strategy in addition to being a proto-colonial resource base for China, is to become a tourist destination for a new Chinese middle class.

One Response to “Tribute in the bag”

I understand this would change the development gap among ASEAN members into a development canyon, but I imagine Japan must not be too happy about this either. I don’t hear much about Japan’s investment in Southeast Asia’s infrastructure, honestly. But could China’s relations with mainland Southeast Asia affect Japan’s economic future? I would like to hear your thoughts on this, if possible. Thank you for the post! I found it to be insightful.